I was at a dinner party a couple of weeks ago where people much more knowledgeable than myself were talking very bullishly about the future of the People’s Republican of China.<\/p>\n
They praised the education system, which rewards and re-enforces ambition and accomplishment; they lauded China’s leaders for moving quickly to modernize and embrace new technology.<\/p>\n
The next generation of Chinese executives, engineers and innovators are more ambitious, better educated, and far, far more numerous.<\/p>\n
It sounds like a no-brainer that a country of 1.3 billion people with that kind of zeal would eventually surpass and even eclipse the United States, a society with just 300 million muddled and overconfident citizens.<\/p>\n
Here’s why I’m still skeptical that the Chinese Miracle is all that it’s cracked up to be.<\/p>\n
1.\u00a0 The baby bust.\u00a0 China has a huge population bubble right now of middle-aged and elderly people.\u00a0 But because of the long-standing “one child” policy, that bubble is going to pop.\u00a0 Experts worry about the country’s “4-2-1” problem, in which one worker will be forced to support two parents and four grandparents.<\/p>\n
Thirty years from now, China’s population is expected to be roughly as geriatric as that of Japan<\/a>.\u00a0 You think our Social Security program is troubled?<\/p>\n
2.\u00a0 The environment bust.\u00a0 Yes, China has taken the lead on developing alternative and renewable energy; and yes, the country has developed a nascent environmental movement.\u00a0 But China’s rush to modernize makes the Soviet Union’s despoilation of their landscape look tame by comparison.<\/p>\n
Here’s how the World Bank describes China’s future:<\/p>\n
“The country’s environmental problems include land degradation, deteriorating water quality and water scarcity, severe air pollution and declining natural forest cover.<\/p>\n
These problems threaten the health and prospects of current and future generations and are undermining the sustainability of long-term growth.”<\/p>\n
Whether or not China creates and enforces more environmental laws, their competitive advantage will shrink — either because their ecosystems are collapsing or because the cost of doing business will rise.<\/p>\n
3.\u00a0 Poverty is rampant. China has fought a remarkable battle against the direst form of poverty, but tens of millions of people in that society live on less than a few dollars per day.\u00a0 What’s more, the economic revolution has benefited some sectors of the society far more than others<\/a>.<\/p>\n
Rising quality of life has mostly pacified this “left behind” population.\u00a0 But it’s unclear how poor Chinese — especially in rural areas — will react if the booming economy sags, or crop failures occur, and they’re tipped back into deep poverty.<\/p>\n
4.\u00a0 The Chinese are making the same mistakes we made.\u00a0 They are still pouring billions of dollars into their overheated housing market.\u00a0 This bubble is viewed by the Chinese government as unsustainable<\/a>, but so far their efforts to temper the speculation have been unsuccessful.<\/p>\n
Their bubble is bigger and scarier than ours ever was.<\/p>\n
5.\u00a0 They rely to much on us.\u00a0 China’s economy has diversified, but it is still built on an export model that is unsustainable.<\/p>\n
It’s predicated on two ephemeral fictions.\u00a0 First, the idea that China can continue to artificially fix its currency at a low value, giving its manufacturers huge advantages.<\/p>\n
Second, the idea that consumers in the United States can continue to borrow and max out their credit cards in order to buy Chinese goods.\u00a0 Those days are coming to and end.<\/p>\n
Both of these factors leave the Chinese deeply vulnerable.\u00a0 How vulnerable?<\/p>\n